Roger Mullin: What a pleasure it is to see you, Mr Hanson —my favourite Chair—[Hon. Members: “Ah!”]—for a Tuesday afternoon.
The Minister is such a reasonable person that I am sure he is keen to accept amendments 180 to 185. They would place a duty on the Secretary of State that in giving direction to UK Research and Innovation regarding research priorities, it is incumbent upon UKRI and the Government to ensure that the needs of the entire United Kingdom are met and to consult with Ministers in all the devolved jurisdictions.
The Scottish, Northern Irish and Welsh Governments must have a formal role in providing input to the UK Government. Too often, the needs of Scotland, Northern Ireland and Wales are forgotten. Allow me to give two examples related to the Bill—neither of which, I hasten to add, arose out of malice. My hon. Friend the Member for Glasgow North West and I noticed a few days before oral evidence sessions were due to start that every major institution in Scotland had been omitted from the list of those being called to give evidence. I know the Minister, and I know the Whip. They are reasonable people. I know they did not exclude us out of malice, but that omission demonstrated that we were an afterthought in a Bill Committee where they knew there would be representation from Scotland. For Scotland to be treated as a mere afterthought shows the need at times to put into legislation the right to be consulted. Being an afterthought is just not good enough.
Let me give another example. Later today, we will discuss an amendment relating to post-study work visas—a matter that has been raised many times by Scottish Members in this House and by the Scottish Government as it is of great concern to us and of great importance to our economy and our universities. What happened a few short weeks ago? Suddenly, the UK Government announced a pilot that involves no university in Scotland, Wales or Northern Ireland, nor any consultation with the Governments in the devolved Administrations. That is another example of us not being treated with any respect whatsoever. The amendment calls for formal recognition in the Bill that we will not be consigned to the role of a mere afterthought at the whim of this or any other Government.
The Scottish research sector has different priorities from much of the rest of the UK, and there is a concern that those priorities will be missed within the new UK-wide research body. For example, Scottish higher education institutions have been pioneers in research collaboration since the establishment of the first research pools in 2004. One of the key principles behind research pools was that they should support research excellence “wherever it is found”, which is sometimes in relatively small research groups in less research-intensive institutions. We are concerned that initiatives to encourage collaboration between mere institutions can sometimes exclude such pockets of excellence through, for instance, threshold criteria dependent on scale. Scotland’s higher education sector, as the Minister will know, is worth more than £6 billion to our economy, and we must ensure that that continues. As it stands, the Bill has the potential to harm Scotland’s world-renowned research.
The Minister and his Government need to ensure that devolved Administrations have an equal say and that their voices are heard within UKRI to ensure that this Bill will be of no detriment to any part of the United Kingdom. It is also critical to be able to take account of the different economic and social priorities of devolved Administrations. Mention was made of Brexit this morning—by the Minister, if memory serves me correctly—and it immediately brought to mind not the example of Scotland but that of Northern Ireland, where there are going to be particular challenges, not least in how cross-border trade, cross-border research collaboration and the movement of people will be handled. That presents a context in Northern Ireland that is not present in any other part of the United Kingdom. Its voice needs to be heard as well. Not to have proper input on these and other matters would potentially be not only disrespectful, but damaging. In Scotland our drive for innovation and growth and our highly distinct social agenda, need to be factored in. I have no confidence that that will be possible without ensuring that a statutory duty is placed in the Bill. I beg to ask leave to move the amendment.

Jo Johnson: I thank the hon. Gentleman for his further clarification. I am always happy to be educated by him in lots of ways, but on this matter we will have to disagree. We gave opportunities to the Committee to submit names to give evidence before it. As I said, we had already invited significant representations from UK-wide bodies and were delighted to accommodate the further suggestions his party made. I think we have to move on.
Turning to amendments 180 and 181, the research councils and Innovate UK, within UKRI, will continue to fund excellence wherever it is found in the UK. UKRI has the ability to work with the devolved bodies and a statutory duty to use its resources in an efficient and effective way, meaning it will look for all opportunities to collaborate. It is also important than Innovate UK can operate independently to spot opportunities and to provide the right access to finance conditions for economic growth. To improve its understanding and response to economic policies in the devolved Administrations, Innovate  UK will be appointing full-time regional managers in Glasgow, Cardiff and Belfast. That means that UKRI and its councils will have to consider the whole of the UK, ensuring that the current co-operation will continue.
Turning to amendment 326, on Research England consulting relevant bodies in the devolved Administrations on grant conditions, block funding of universities for research—so-called quality-related funding—is a devolved matter. It is therefore not appropriate to require Research England to consult its devolved equivalents, just as the devolved funding bodies are not required to consult HEFCE now. Our approach mirrors that taken in the Further and Higher Education Act 1992. Of course, that does not mean HEFCE has operated in isolation—in fact, HEFCE works closely with its devolved equivalents, such as the Scottish Funding Council, on areas like the research excellence framework. A Government amendment ensures that Research England can continue that joint working in the future.
Turning to amendments 182 to 185, on the Secretary of State consulting the devolved Administrations before taking key decisions that will have an impact on UKRI, the Government work closely with the devolved Administrations now and UKRI will continue to work with them. However, we would not seek to bind UKRI into a restrictive process of consultation. Legislation must remain sufficiently flexible for the Government and for UKRI to react quickly to emerging issues, as the research councils acted earlier this year to promptly commission research into the Zika virus.
The amendments also require the Secretary of State to act in the best interest of all parts of the UK. As a UK Government Minister, I assure the Committee that that is already the case. That was recognised by the former vice-chancellor of the University of Dundee, Sir Alan Langlands, in the evidence he gave last month:
“Even given the dynamics of ?devolution and the fact that essentially we are dealing with four different financial systems and four different policy frameworks, the one thing that has stuck together through all this has been the UK science and research community. The research councils, HEFCE and, indeed, BIS have played a hugely important part in that.––[Official Report, Higher Education and Research Public Bill Committee, 6 September 2016; c. 26-27, Q40.]
I agree with Sir Alan. The research community functions remarkably well across the UK political landscape, not least because the UK Government and the devolved Administrations work together to make it do so. Therefore, recognising that the Government share the hon. Gentleman’s concern in ensuring that UKRI effectively serves the whole of the UK, I ask that he withdraws amendment 180.

Gordon Marsden: I beg to move amendment 324, in clause88,page54,line8,after “relate” insert
“to maintain its focus on assisting businesses and”.
This amendment seeks clarification that Innovate UK is intended to maintain its business facing focus as a Council of UKRI.
The clause is relatively brief on the exercise of functions by Innovate UK. Brevity is not always a bad thing, but we have tabled the amendment because we seek strong clarification of whether Innovate UK is intended to maintain its business-facing focus as a council of UKRI. I remind the Committee that the White Paper stated that its
“business facing focus would be enshrined in future legislation, which would replicate the functions in Innovate UK’s current charter.”
I am not a betting man, but, if I were, I would put money on the likelihood that, when I sit down and the Minister rises, he will look at me more in sorrow than in anger and refer me to the note published this month, “Higher Education and Research Bill: Innovate UK”, with its sub-heading, “What do the reforms mean for Innovate UK?” I shall not deprive him of the pleasure of reading substantial chunks of it to us, but I will just quote it. I do not know whether the Minister wrote it himself.
The end of the first paragraph states:
“We are very clear that Innovate UK will retain its current business-facing focus. Innovate UK will not become just the commercialisation arm of the Research Councils.”
Those are fine words, but you will know, Mr Hanson, that, in the words of the old proverb, fine words butter no parsnips. If I were to continue that metaphor I should say that, if I were a cynical person, which I am not, the mere emphasis given in the note would remind me of another old saying, that “the louder they protested their honour, the faster we counted the spoons”. On this occasion we should like to examine some of the cutlery, if I may pursue the analogy.
I refer the Minister back to the evidence session with the chief executive of Innovate UK. I thought that what she said was revealing. Her evidence was measured and confident and she was, overall, in favour of what was going ahead, but she put down some substantial caveats. I will remind the Minister of what she said. I had asked her, on the financial tools, whether there were things in the Bill that concerned her. She said:
“There are three areas in particular on which we need to be absolutely sure that the intent and what was in the White Paper is still there in the Bill. The first of those is the business experience of the board and the Innovate UK champion, which is very clear  in the White Paper. As I understand it, that is possible and enabled through the Bill, but I think that the balance of business and research experience is very broad and could be tightened up a bit.”
She then said, about the financial tools:
“We are keen to be able to use things such as seed loans and equity, and other councils within UKRI have dipped a toe into that.”
She went on:
“We need to be absolutely clear, in how the Bill is finalised”—
whether this is the finalised version remains to be seen—
“that we ensure we have as much flexibility as the research councils have had and some of our enterprise partners have. We work very closely with Scottish Enterprise, which uses more financial tools than we currently have, and Enterprise Northern Ireland. We want to move at speed and to empower companies to grow in scale and be really competitive, but we must ensure we have the flexibility to do that and not slow down our clock speed. I think there is a bit of work to do looking at that in more detail.”
Then when talking about institutes and research, she again said:
The Bill gives us the great opportunity to look across the whole spectrum…At the moment, as I understand it, if Innovate UK wanted to create an institute and employ researchers to do the work that businesses need, we absolutely could. I am not sure, within the letter of the Bill, that we are still going to be able to do that. I think that probably needs to be looked at.”––[Official Report, Higher Education and Research Public Bill Committee, 8 September 2016; c. 80-81, Q125.]
When I looked again at the transcript of that session and at what Ruth McKernan, the chief executive, said on that occasion, it reminded me of a little exchange between the Minister and I in the following session when we had the opportunity to put him in the box. In fact, he volunteered himself to the box for some cross-examination by the Committee. On that occasion, I pressed him rather strongly—he was not best pleased to be pressed and certainly gave a spirited response—on the subject of the reports of the House of Lords Science and Technology Committee. At the risk if inflaming the Minister further and perhaps getting him removed him from Lord Selborne’s Christmas card list, I will repeat a summary of the findings, but not the lot because I do not want the Minister to blow a gasket:
“We have serious concerns about the integration of Innovate UK into UK Research and Innovation. With the exception of the Government itself, none of our witnesses gave an unqualified welcome to the proposals. We do not believe that the Government has consulted effectively with Innovate UK’s stakeholders to achieve buy in for this proposal. The Government’s case for integration appears to be based on a flawed linear model of innovation where Innovate UK functions as the commercialisation arm of the Research Councils.”
The Minister has, of course, been keen to address and refute that.
There was a long letter from Lord Selborne and a reply from the Minister that was not as long but was substantial, and I think they probably agreed to disagree. The fact remains, however, that those concerns also remain. The Minister must do a slightly better and specifically more focused job if he is to reassure not just members of this Committee but the range of people he has prayed in aid during other sittings of this Committee—new providers, funds coming in, private equity and all the rest of it.
These other names will not easily go away and I want to quote three or four from the evidence session to  which Lord Selborne referred. He quoted Dr Virginia Acha of the Association of the British Pharmaceutical Industry, who said:
“I would be concerned if Innovate UK were brought under the same decision-making approach that a research council would be brought under, because they are making very different decisions.”
Professor Luke Georghiou said:
“There is real concern about the huge disparity between the size of the budget between the existing research councils and Innovate UK, summed up by concern that Innovate UK’s influence would be dwarfed and its impact distorted. That was how members summed up the risks to us.”
Mr David Eyton, who spoke to the Lords Committee, said:
“Effectively”—
Innovate UK
“is the start-up in the context of”
the research councils.
“It is 10% of it; the other 90% is very stable. It is comparatively new and needs to really motor. Will it get the management attention and focus, which requires the quite different skills for governing innovation ecosystems from governing science? That is also the question for that body: the balance of skills on the governing body.”
Finally, but obviously not least, we have what Dr McKernan said to the House of Lords Committee on that occasion. She might have used slightly different terminology—not least because the Minister was there and in courtesy to him—but she said:
“There are also risks that I have not gone into.”
She was talking about the possibility of funding from other Departments being diminished. She continued:
“There are some other areas of mitigation where I still have concerns…We manage about £300 million of funds in partnership with other government departments, for example the Aerospace Technology Institute through BIS”—
with which I am familiar, because there is a BAE Systems site at Warton near my constituency in Blackpool. I am familiar with the work that BAE Systems has done previously with Innovate UK and the Aerospace Technology Institute. Dr McKernan went on to say that Innovate UK does a lot of work with the Department of Energy and Climate Change and the Department for Culture, Media and Sport. She continued:
“It is really important to safeguard those relationships and not feel the need to create something else because we have created”—
these are her words, not mine—
“a fracture in putting Innovate UK within UKRI.”
The Minister may feel that that is slightly overstating it and overegging the pudding, but I hope that I have done enough to show him that that succession of concerns, considerations, worries and so on will not easily be assuaged simply with a paragraph saying that the Government will allow Innovate UK to retain its current business focus. I think that people out there in the groups that I have described want something a little more substantial.
The Royal Society’s position statement on this subject sums up the issue. It says:
“There has been considerable debate about whether or not Innovate UK should be part of UKRI. On balance, the Society believes the potential benefits of creating an organisation with an integrated overview of UK research and innovation infrastructure, assets and expertise outweigh the risks of a more fragmented structure, and that Innovate UK should be part of UKRI. It is  essential that in creating UKRI, however, that Innovate UK’s unique business-facing focus and links to its customer base are not put at risk.”
That is where we stand today. The jury is still out on that and on the assertions with which the Minister hoped to placate Lord Selborne, and we would be interested to hear a little more chapter and verse to assuage our concerns.

Roger Mullin: I thank the Minister for indicating earlier that he was willing to allow me to say a few words on amendment 284 before he responds to the debate.
My hon. Friend the Member for Glasgow North West and I have been contacted, by many institutions in the devolved nations, about amendment 284 more than any other. They are concerned about the potential that hazard will be placed in their way because of the funding structure. The amendment would ensure separate funding allocations for the research councils, Innovate UK and Research England. It is supported not only by the significant number of institutions that I mentioned earlier, but by the Scottish Funding Council. I have had extensive discussions with Dr John Kemp, who is the acting chief executive there.
We know that Scotland performs well in attracting funding—grants, studentships and fellowships—from the research councils, although it does not do quite so well in attracting funding for research institutes and research infrastructure. We of course recognise that there is always scope for flexibility in funding, but there is a difference between building flexibility into something and building in something that will create a hazard to core funding. That is what particularly concerns me about the clause: as it stands, it will allow the Secretary of State or the UK Government, if they so wish, to alter the balance of funding among the research councils.
Any grant to UKRI is ultimately research project funding, which of course should be competitively available throughout the UK. It is therefore necessary to have transparency about what goes to UKRI and what goes to Research England, given that the funds distributed for research infrastructure by the latter body will be available only to English institutions. Separate financial allocations must be introduced for Innovate UK, Research England and the different research councils collectively.
We are extremely concerned, too, that there are no provisions in the Bill to ensure that the Secretary of State and the UK Government do not give directions to UKRI to move funds in year on its own initiative between constituent parts—especially to Research England. That would definitely not be in the spirit of the Nurse report, nor would it give Scotland, Wales or Northern Ireland a fair and equal say in research allocation. If for whatever reason funds had to be moved between research councils and Research England or Innovate UK by the Secretary of State, that must surely happen only if the devolved Administrations gave their consent.
Amendment 284 would ensure that fairness and transparency were at the forefront of the reserved funding allocation to UKRI and the allocation to Research England. It would also ensure that the balanced funding principle was measured in relation to the proportion of funding allocated by the Secretary of State for reserved UK and devolved England-only funding, and that clarity was provided on when that might not be achieved. Many bodies that have talked to me are at a loss as to why the appropriate funding streams are not set out in the Bill. I am therefore particularly keen to hear the Minister’s response.

Jo Johnson: I thank the hon. Member for Blackpool South for the opportunity to discuss Haldane. Let me reassure the Committee that this Government are fully committed to the fundamental principle that funding decisions should be taken by experts in their relevant areas. As my predecessor in this role, David Willetts, said in 2010:
“excellence is and must remain the driver of funding decisions, and it is only by funding excellent research that the maximum benefits will be secured for the nation.”—[Official Report, 20 December 2010; Vol. 520, c. 139WS.]
We have ensured that that principle is reflected in the design of UKRI.
The provisions in the Bill contain several measures to protect the Haldane principle, including that UKRI will be established as an arm’s length body independent of Whitehall; that UKRI will be required to devolve functions within specified fields of activity to its constituent councils, ensuring that individual funding decisions are made by relevant experts; and that subsidiarity in the design of UKRI will ensure that the councils take all scientific and other decisions in their area where expert knowledge is essential to driving excellence.
As hon. Members know, I published a fact sheet on 12 October that sets out more details of how the Bill protects the Haldane principle, which I hope has been helpful. I do not agree that the amendment would strengthen the Haldane principle in the Bill. I believe the unintended consequence would be to weaken significantly the safeguards on public funding within the legislative framework. The Secretary of State currently has an equivalent power of direction over research councils in section 2 of the Science and Technology Act 1965, and our proposals in clause 94 are intended to mirror that.
The rationale for this power is that the money given to UKRI, which is at present upwards of £6 billion per annum, is that the Secretary of State can deal swiftly with any financial issues arising from, for example, mismanagement. That ensures the most effective safeguard for public finances. Such powers of direction are rarely used, but given the very large sums of public money for which UKRI will be accountable, they are proportionate. On that basis, I ask the hon. Gentleman to withdraw amendment 328.

Gordon Marsden: I am sorry if I have delayed a bundling up of clauses.
The power to make consequential provision of one sort or another often appears in Bills. It is a phrase that slips off the tongue and sometimes down the gullet rather too easily. I want to draw the Committee’s attention to the implications of subsection (2), which reads:
“(2) The power conferred by subsection (1) includes power to amend, repeal, revoke or otherwise modify—
(a) primary or secondary legislation passed or made before this Act or in the same Session as this Act, or
(b) subject to subsection (3), a Royal Charter granted before this Act is passed or in the same Session as this Act.”
Those anodyne phrases, which have been polished over many years by parliamentary draftspeople, can often pass by unnoticed, but in this context it is worth debating for a few moments the propriety of the Secretary of State being given such powers when we are told that they will involve, for good or ill—people can make their own decision—the overturning of not 100 years but several centuries of custom and practice with royal charters. Some people believe that the Bill will also cause a major shift in the relationship between the  higher education sector and the state—a relationship that anyone who is of an antiquarian disposition, or even just knows their history, will know goes back nearly 800 years. That is why several organisations have called for changes to be made to the Bill.
I am particularly unhappy about the complete removal of the powers of royal charters. We have debated that issue previously, and I do not intend to go over it again, but this clause is the practical expression of that airbrushing out of royal charters and a long-stop to the development of powers for the Office for Students. That is why Universities UK has called for a higher threshold of evidence to be required of the OFS before it can take sanctions against an institution. The University of Cambridge said in its evidence that the revocation of degree awarding powers or university title
“is not a decision to be made without a high level of scrutiny and proper accountability.”
This is not simply an arcane argument among academics, because as the Opposition have endeavoured to emphasise, what affects universities, particularly in the 21st century, is not just what affects their students and academics but what affects the people who work in them, the local economies that are affected by them and so on. It is therefore not arcane or antiquarian to discuss whether the Government are going too far in this issue.

Jo Johnson: The majority of research funding is administered by the seven research councils—HEFCE in England and equivalent bodies in the devolved Administrations. That will continue with the advent of UKRI. However, an additional proportion of research funding is allocated by Ministers through powers apportioned in section 5 of the Science and Technology Act 1965 and section 10 of the Higher Education Act 2004. It is under those powers that, for example, BEIS funds the UK Space Agency.
In this Bill, the powers of UKRI to fund research are defined as powers to make
“grants, loans or other payments”
and to set terms and conditions for those—for example, to charge interest. However, there is no equivalent clarity in the 1965 Act and 2004 Act on the funding powers of Ministers. The amendment will ensure there is equivalence between UKRI and Ministers’ powers under those Acts. It will also ensure that Ministers and UKRI are able to make grants, loans or other payments and to specify terms and conditions.